Rediscovered: within months of its completion this self-portrait of Rembrandt at 28 had been turned into a portrait of a Russian aristocrat. Photo: PA

An American casino magnate yesterday paid a record £6.9m at auction in London for a Rembrandt self-portrait that had been hidden by overpainting for more than three centuries.

The auctioneer Sotheby's said it was the highest price ever paid for a self-portrait of the Dutch master. The image had probably been overpainted by one of his pupils and turned into a portrait of a Russian aristocrat.

The painting, which was only definitively restored and authenticated last year, was bought by Steve Wynn after his transatlantic telephone bids defeated a rival.

He plans to display it at his gallery in Las Vegas.

The wood-panelled painting shows Rembrandt aged 28 and is dated 1634, by which time he would already have been famous and living in luxury in Amsterdam with his new wife Saskia.

Alex Bell, the old master expert at Sotheby's, said the self-portrait of the artist staring boldly from under his beret had been painted over within a few years of its completion.

The expert said: "You have to remember that while Rembrandt was an artistic genius, he was also a commercial artist selling his pictures for a living. If a painting did not sell quite quickly it would be painted over into a more saleable commodity."

Even though it bore a Rembrandt signature it was never thought to be bona fide as the altered painting lacked the master's finesse.

Suspicions were aroused in the 1960s and some of the paint was chipped away. But the job was not properly undertaken until after 1995 when the Rembrandt Research Project began to investigate.

The Rembrandt House Museum in Amsterdam announced last January the painting had been identified and it went on display there.